continued Although the new law has been referred to as a “2 percent tax cap,” its provisions are actually more complicated than that.
The law does not restrict any proposed tax levy increase to 2 percent. Rather than cap a district’s tax levy, the law prescribes an eight-step formula for districts to calculate a figure that is essentially a threshold for what level of voter support is needed for budget passage. This figure is known in the law as the “tax levy limit.”
Individual school districts will each have a unique tax levy limit. One step of the calculation that contributes to determining the tax levy limit requires that the current year’s tax levy, adjusted for exemptions, cannot increase under the proposed budget by more than 2 percent or the current rate of inflation, whichever is less. However, there are a variety of other adjustments and exemptions that also affect the final tax levy limit threshold. If the proposed tax levy (before exemptions) is at or below this threshold, a simple majority (50 percent plus one) is needed for budget approval.
If the proposed tax levy (before exemptions) exceeds a district’s tax levy limit, the support of a supermajority (60 percent or more) of voters is required for budget passage.
Exemptions include some court orders, some pension costs, and local capital expenditures. These items are added to the tax levy limit to determine the maximum tax levy a district can propose while still requiring a simple majority for budget passage.
For more school budget news, go to nscsd.org/budget.